Drivers get global warming fee, plus tax

The Associated Press

In this photo taken Nov. 12, 2014, Lydia Holland fills up at a gas station in Sacramento, Calif. The United States and China can look to California as an example of the costs and challenges of fighting global warming, since the state has imposed some of the world’s toughest air quality standards as it moves to lower emissions. The state has created a "cap-and-trade" system to impose extra costs on businesses that emit pollutants. (AP Photo/Rich Pedroncelli)

In this photo taken Nov. 12, 2014, Lydia Holland fills up at a gas station in Sacramento, Calif. The United States and China can look to California as an example of the costs and challenges of fighting global warming, since the state has imposed some of the world’s toughest air quality standards as it moves to lower emissions. The state has created a "cap-and-trade" system to impose extra costs on businesses that emit pollutants. (AP Photo/Rich Pedroncelli) (The Associated Press)

Commentary

Retailers pay the fee when distributors load tanker trucks, then the state requires gas station owners to collect sales taxes based on the full pump price.

“They are not calling it a tax, and these guys (wholesalers) are adding it to the cost of the fuel, so you are paying a tax on a tax,” said Max Castillo, owner of Aten Express, a convenience store and gas station in Imperial. “California is the leader of the nation in paying taxes.”

The new fee took effect on New Year’s Day, adding about 10 cents per gallon to the wholesale cost of gasoline and 12 cents for diesel.

Most consumers didn’t notice, because crude oil costs have been falling, taking pump prices with them. My local Costco was charging $2.36 a gallon for regular a day before and after the new fee took effect.

But the fee was certainly passed along to retailers, many of whom must refill their station tanks every day or two, Castillo said.

In California, the average pump price includes 76.87 cents per gallon in fees and taxes, according to the American Petroleum Institute, which tracks such costs nationwide.

Excise taxes, which are supposed to support roads and public transit systems, cost consumers 36 cents per gallon for the state and 18.3 cents for the federal government.

An underground storage tank fee adds 2 cents a gallon. The global warming fee, which is variable and could soar in the future, added about a dime this week.

Then the state adds 2.25 percent of the full retail price — including those other fees and taxes — while city and county sales taxes add more (0.5 percent in most of San Diego County).

Of course, the same principle applies to sales taxes on other consumer products. If sodas doubled in price at the gas station, so, too, would the tax on their sales.

And, at least in theory, that soda price includes the cost of income taxes paid by the bottler and its suppliers. Thus everything we buy is partly double-taxed.

Yet there’s just something more annoying about gasoline sales taxes. For one thing, most people can't protest by quitting driving or finding substitute, lesser-taxed fuels.

Then there’s the volatility. When prices shoot past $4 a gallon, it compounds our misery to know Sacramento is raking it in, too.

Lawmakers know this looks bad. In 2010 they cut the sales tax percentage on transportation fuels and raised the state excise tax, which is fixed. This reduced, but didn’t eliminate, the windfall for the Treasury when pump prices spike.

And, not incidentally, boosting the fixed tax puts a floor under state revenues when prices fall.

Now we have the global warming fee, which creates a new level of complexity and potential for public outrage.

Under Assembly Bill 32 in 2006, the state mandated a market system to gradually reduce emissions of carbon dioxide and other greenhouse gases that trap heat in the atmosphere.

Officials capped the level of emissions and forced heavy industry to buy permits in a quarterly auction. This cap-and-trade system creates financial incentives for reductions, mostly because the state is ratcheting down the cap by about 3 percent a year until 2020.

If industry doesn’t figure out how to cut emissions, permit prices are sure to rise as shortages develop.

California’s legislative analyst forecasts costs will range from 13 cents to 20 cents a gallon, but he warns they could exceed 50 cents under some conditions.

Critics have blasted the fee as a “hidden tax.” Some have sued to overturn the levy, arguing it’s not a fee at all, but an illegal tax because it wasn't approved by the required two-thirds of the Legislature.

Until the courts settle the argument, drivers are left with higher embedded costs. Today they are indeed hidden, because markets have sliced crude oil costs in half since June.

But markets won’t deliver cheap oil and gasoline forever. What seems more permanent are the government’s fees and taxes, including the ever-present sales tax that skims from the top.

Correction: A previous version of this story used candy bars as an example of an item subject to sales tax. That's wrong, because candy is considered a food item and thus is exempt from California's sales tax.